What is Blockchain Interoperability?

  • By Tony Morinello in Learning
  • 23 Jul 2022
  • 4 min read

In its short history, Blockchain technology has advanced a great deal. The Bitcoin whitepaper was published in 2008, and later the following year, it was realized with the launch of the Bitcoin network. 6 Years later, in 2015, the Ethereum network went live, giving users access to decentralized smart contracts.

 

Today, there are a countless number of blockchain projects and use cases being realized. The speed in which Web3 has grown is nothing short of remarkable.

 

However, blockchain technology still has plenty of room to mature. While there are many areas that will see advancements in the near future, the way in which blockchains communicate with one another is of particular interest to many users today.

 

Table of Contents

What is Interoperability?

Interoperability is the process of different systems seamlessly sharing data and resources without the need for any additional intervention from an end user. A simpler way to put it, it allows seamless communication without any additional work.

 

There are many examples of interoperability in everyday use, including:

  • A computer mouse being plugged into a laptop and working instantly
  • A camera taking a picture, saving it as a standard image format, and later being read by a computer
  • A web browser reading and displaying a web page
  • Plugging a laptop power cord into a standard wall outlet to charge

Can Different Blockchains Talk to Each Other?

Interoperability for blockchain is certainly possible, and is a common goal for many Web3 projects. In its simplest terms, Blockchain Interoperability is the ability of two or more blockchains to communicate cross-chain and share data between each other.

 

As Web3 projects have evolved, more and more blockchains have been launched for users to interact with. While the rise in the number of projects is generally a good thing, these blockchains have generally operated in isolation from one another. This can result in both limited use cases and scalability.

 

This certainly does not mean that this will always be the case. Cross-chain communication has been a hot topic within the crypto community for some time, with many projects, including Lisk, leading the way towards blockchain interoperability.

Why is Interoperability Important to Blockchain?

While they have their differences, blockchains generally share many core concepts and structures with each other. However, these individual blockchains remain mostly isolated from one another, with no communication between them.

 

By being able to communicate with one another, blockchains will unlock their true power and potential. The number of use cases will dramatically increase, as functionality can be shared between blockchains that could specialize on a single functionality. These solutions will also have the ability to scale much more efficiently as they will not rely on a single, bloated blockchain.

How do Blockchains Connect to Each Other?

Despite blockchain interoperability being early in its overall development and adoption, there have been many discussions and proposals to achieve it. Some of these ideas have been applied in limited capacity already, while others are still being worked on and flushed out. There are also many differences in levels of security, centralization, use cases, costs, and several other factors.

Blockchain Interoperability Solutions

While not an exclusive list, below are a number of the more commonly mentioned and utilized blockchain interoperability solutions. Please keep in mind that we will only cover each of these briefly. For a more indepth look at each solution, please read our Introduction to Blockchain Interoperability blog post.

Cross-Chain Token Exchange

Cross-chain Token Exchange can occur when two parties want to exchange tokens from different chains. In simple terms, cross-chain Token Exchanges can be considered trades, as the end result is two parties exchanging their tokens for one another.

 

Atomic swaps with hash time-locked contracts (HTLCs) are a common technique for cross-chain token exchanges. These swaps are not only trustless, but also the simplest to implement when compared to other blockchain interoperability solutions. With that in mind, they are not a very practical solution. This is due to them being rather slow, mostly due to the requirement of having to properly sync between the chains.

Cross-Chain Token Transfer

Unlike cross-chain token exchanges, cross-chain token transfers do not require an additional party to exchange tokens with. While there are several approaches for cross-chain token transfers, federated 2-way pegs are one of the more well known and often used.

 

Federated 2-way pegs work by having a group of trusted intermediaries manage a multisignature account on both chains to maintain a peg of the token that is transferred. This allows for an effective, cost-efficient option. Despite these benefits, their centralized nature has many risks and goes against much of what blockchain itself stands for.

General Cross-Chain Message

General cross-chain messages are the most flexible of the solutions listed here, as they allow any kind of data to be transferred between chains. This can be quite powerful, as these messages could be utilized for any number of potential use cases. However, it does require a standard messaging system between the chains to allow for such communication.

 

The Lisk network is designed with general cross-chain messages in mind for its interoperability solution. For more information on the Lisk interoperability solution, read the High-level Overview of Lisk Interoperability blog post.

Interoperability in Web3 – 2022 and beyond

It is a very exciting time for blockchain interoperability. While communication between blockchains has been absent until recently, many cross-chain projects and solutions are finally being realized after years of conceptualization.

 

Projects such as Lisk, Cosmos, Polkadot, Chainlink, and others are paving the way for blockchain intercommunication. The future of Web3 is being developed right before our eyes, and it is approaching quickly.

Tony Morinello

Content Manager

Tony earned a Master's Degree in Software Engineering from Regis University, and both a Master's Degree in Exercise Science and a Bachelor's Degree in Secondary Education from California University of Pennsylvania. Prior to joining Lightcurve as a Content Manager, he was a long-time community member, joining back in 2017.